Lumentum to acquire Oclaro for $1.8bn

A definitive agreement has been signed (unanimously approved by the boards of directors of both companies) for Lumentum Holdings Inc of Milpitas, CA, USA (which makes photonics products for optical networking and commercial lasers for industrial and consumer markets) to acquire Oclaro Inc of San Jose, CA, USA (which provides optical components and modules for the long-haul, metro and data-center markets).

For each share held, Oclaro stockholders will be entitled to receive $5.60 in cash and 0.0636 of a share of Lumentum common stock. The transaction values Oclaro at $9.99 per share or about $1.8bn in equity value, based on the closing price of Lumentum’s stock on 9 March of $68.98. This represents a premium of 27% to Oclaro’s closing price on 9 March and a premium of 40% to its 30-day average closing price. Oclaro stockholders are expected to own about 16% of the combined company at closing.

“Joining forces with Oclaro strengthens our product portfolio, broadens our revenue mix, and positions us strongly for the future needs of our customers,” says Lumentum’s president & CEO Alan Lowe. “Oclaro brings its leading indium phosphide (InP) laser and photonic integrated circuit (PIC) and coherent component and module capabilities to Lumentum. The combined company will drive innovation faster and accelerate the development of products,” he reckons.

“Together, we will be an even stronger player in fiber-optic components and modules for high-speed communications and a market leader in 3D sensing,” believes Oclaro’s CEO Greg Dougherty.

The transaction is expected to generate more than $60m of annual run-rate synergies within 12-24 months of the closing and be immediately accretive to non-GAAP earnings per share.

Lumentum intends to fund the cash consideration with a combination of cash on hand from the combined companies’ balance sheets and $550m in debt financing. The transaction is expected to close in second-half 2018, subject to approval by Oclaro’s stockholders, anti-trust regulatory approval in the USA and China, and other customary closing conditions.

One member of Oclaro’s board of directors, as mutually determined, will join Lumentum’s board upon closing of the transaction.

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